Special InTAX: June 2020 Issue 1 | Volume 5

Department of Finance

 

The Department of Finance (DOF) issued Revenue Regulation (RR) No. 15-2020, 19 June 2020, to further amend RR No. 4-2019, relative to the period and manner of availment of Tax Amnesty on Delinquencies (TAD).

The following amendments were made to certain provisions of RR No. 4-2019:

A.        Section 3. Coverage is amended to further extend the period for availment of the TAD until 31 December 2020. However, the said date may be extended if the circumstances warrant an extension such as in case of country-wide economic or health reasons.

B.        The procedure to avail of the TAD under Section 5 (C) is further amended to have the concerned Bureau of Internal Revenue (BIR) Office receiving the request for Certificate of Delinquencies/Tax Liabilities issue said certificate to the taxpayer within three (3) working days from the date of the request. Should the concerned BIR Office find that the certificate cannot be issued, the BIR Office must state in writing the legal and factual basis for its denial.

Further, the concerned Revenue District Office / Large Taxpayers Division / Large Taxpayers Collection Enforcement Division shall endorse the duly accomplished Tax Amnesty Return and Acceptance Payment Form within one (1) working day from receipt of complete documents.

Lastly, the availment of TAD shall be considered fully complied with upon completion of the required steps within the period set forth under Section 3 of these Regulations.

 

(RGM & Co. Note:  The RR was published in the Manila Bulletin on 20 June 2020.)

 

Supreme Court

 

The Supreme Court (SC) ruled in Bureau of Internal Revenue vs First E-Bank Tower Condominium Corp., G.R. Nos. 215801 and 218924, 15 January 2020, that Revenue Memorandum Circular (RMC) No. 65-2012 is invalid and that gross receipts of condominium corporations including association dues, membership fees, and other assessment/charges are not subject to income tax, value added tax (VAT) and withholding tax.

The SC declared that RMC No. 65-2012 sharply departs from the SC ruling in Yamane v. BA Lepanto Condominium Corp. which emphasized that a condominium corporation is not designed to engage in activities that generate income or profit. The collection of association dues, membership fees and other assessment/charges is purely for the benefit of the condominium owners. As it is only a necessary incident to its purpose to effectively oversee, maintain, or even improve the common areas of the condominium as well as its governance, RMC No. 65-2012 also invalidly declares that a condominium corporation furnishes its members and tenants with benefits, advantages and privileges, and consequently, such payments in return constitute taxable income or compensation for beneficial services.

The SC also declared that RMC No. 65-2012 effectively expanded, if not altered, the tax laws. Association dues, membership fees and other assessment/charges are not subject to income tax because they do not constitute profit or gain. These fees do not also arise from transactions involving sale, barter or exchange of goods or properties, or sale of a services, and as such, not subject to VAT. These are nonetheless not subject to withholding tax because the law provides that only income, be it active or passive, earned by a payor-corporation can be subject to withholding tax.

 

Attached are the full texts of the issuances.

RR 15-2020

BIR v First E-Bank Tower Condo Corp GR Nos 215801 and 218924